Temu's triumph is a one-of-a-kind success story, impossible to replicate. Beyond the pursuit of "becoming Temu," there's a fervent hope for a reshaped global e-commerce landscape.
In 2023, Temu, the cross-border e-commerce platform under Pinduoduo, has been a sensation. Reports indicate that in the third quarter of 2023, Temu's Gross Merchandise Volume (GMV) surpassed the USD 5 billion mark (approximately CNY 36.55 billion). Projections for 2023 estimate a whopping USD 14 billion in total GMV, with Pinduoduo setting an ambitious target of doubling this figure to USD 30 billion in 2024.
Earlier rumors hinted at one of Temu's key performance goals – achieving a North American GMV surpassing the fast-fashion titan Shein on a specific day. True to the rumors, Temu achieved this milestone in May 2023, surpassing Shein's sales in the United States.
Since its debut in the United States in September 2022, Temu's performance metrics have been on a meteoric rise. Sensor Tower's data reveals that Temu's global downloads exceeded 300 million between September 2022 and November 2023, with North America and Europe claiming 44% and 29%, respectively. Notably, on Temu's one-year anniversary, monthly unique website visitors soared to 42 million, and the single-day GMV reached an impressive USD 80 million (approximately CNY 585 million).
Temu's growth trajectory extends to user acquisition and engagement. GWS data highlights a daily addition of nearly 10 million new users since January 2023, showing no signs of slowing down. Additionally, Apptopia's stats indicate that Temu's active users spent an average of 22 minutes per day on the platform in October, double the time spent on competitors like Amazon and AliExpress.
Fueled by its trifecta of low prices, comprehensive hosting, and dynamic marketing strategies, Temu swiftly expanded to 39 countries, including the US, Canada, Australia, New Zealand, France, Italy, Germany, Japan, and South Korea. Recent expansions into Chile, Israel, and Saudi Arabia showcase Temu's global ambitions, with whispers of forays into the African market circulating.
Despite its rapid ascent, Temu's model and strategy have sparked controversies, mirroring Pinduoduo's domestic experience. The sustainability of its low-price strategy is questioned, with concerns about market disruptions and potential impacts on local enterprises and labor markets. Moreover, issues surrounding product quality, ethical business practices, and legal disputes pose additional challenges for Temu's continued success.
Building a reputation amid controversy
Despite its rapid ascent, Temu's model and strategy have been a subject of ongoing controversy, reminiscent of Pinduoduo's domestic trajectory.
The primary scrutiny directed at Temu revolves around the sustainability of its low-price strategy. The platform features products with relatively modest price points, posing a challenge to traditional e-commerce entities that traditionally hinge on brand appeal and service excellence to maintain pricing authority. Simultaneously, there are apprehensions that Temu's entry might disrupt the prevailing market price structure, exerting an influence on the local product market. The potential for upheaval raises concerns about its impact on small and micro enterprises in certain countries, with the added risk of adversely affecting the labor market. Consequently, some nations are likely to devise pertinent policies to address these concerns.
For instance, the Indonesian government has imposed restrictions on cross-border e-commerce products priced below USD 100. Indonesian Minister of Cooperatives and Small and Medium Enterprises, Teten Masduki, has proposed to the president the prohibition of Temu's entry into its market. In response, the Indonesian government has introduced e-commerce regulations, specifically forbidding platforms from employing low-price strategies to entice consumers. This move aims to safeguard small, medium, and micro enterprises, fostering fair competition with e-commerce platforms.
However, questions loom over the sustainability of the strategy of penetrating markets through low-price subsidies and traffic generation.
Product quality has become a focal point of external scrutiny. Some merchants view Temu as an efficient channel to clear inventory, selling goods languishing in warehouses at slim profits, with compromised quality control and inspection procedures. Given its rapid expansion, the effectiveness of Temu in managing quality concerns, including counterfeit and substandard products, remains to be observed. Addressing logistics challenges related to returns is also imperative. Striking a balance among merchants, customers, and platforms while reducing costs, enhancing efficiency, and sustaining low prices and profitability necessitates careful consideration.
Critics have raised concerns about Temu's business ethics, exemplified by a lawsuit from Shein alleging brand counterfeiting. In a countermove at the end of 2023, Temu sued Shein, accusing it of employing a "mafia-style intimidation" strategy. The Better Business Bureau issued a warning, noting a surge in complaints since Temu's launch. Accusations include excessive collection of consumer information, encompassing social media and banking details. Overseas policies have also been cautious due to cybersecurity concerns, plunging Temu into significant controversy.
Moreover, Temu's low entry threshold is a double-edged sword, fostering rapid development but giving rise to issues like image and video theft. Temu has grappled with ongoing lawsuits and disputes related to these challenges.
Reasonable existence of the new concept
Despite initial skepticism, Temu has emerged as a focal point of considerable attention. Hailing from China, Temu strategically set its sights on North America as its inaugural market, aligning seamlessly with the region's characteristic of "consumer stratification." Targeting price-sensitive consumers, Temu leveraged its strength in offering competitive prices, effectively tapping into the consumer mindset. Seizing opportunities on platforms like Amazon, Temu zeroed in on a substantial supply of "White Labeling" products with abundant availability and high demand. Through a lenient entry policy, Temu attracted a plethora of small and medium-sized merchants, dominating in emerging markets and establishing a niche in the "edge market."
Employing its distinctive C2M (Consumer-to-Manufacturer) model, Temu departed from the traditional sales approach involving acquisition, wholesale, and retail, eliminating layers of markup by intermediaries. This allowed manufacturers to directly engage with consumers, significantly reducing the cost of goods and encouraging high-volume sales with slender profit margins. Within the platform, Temu correlated low prices with high traffic, motivating merchants to generously discount their products. With reduced advertising expenses, platform merchants found added "profit" incentives, benefiting consumers while enabling Temu to maintain its steadfast commitment to low prices.
EqualOcean asserts that this precisely embodies the substantial business opportunity Temu has pursued, providing optimal overseas value amidst economic downturns and the global shift towards "inclusive consumption."
Moreover, inheriting Pinduoduo's business model, Temu perpetuates its social e-commerce approach, urging user participation in group purchases. Its page design effectively kindles users' purchasing desires, with promotional discounts dominating the user interface, prompting impromptu orders upon encountering enticing offers. Red envelopes, discount vouchers, and free shipping policies further amplify purchase volume, creating a "viral" internet phenomenon of explosive overseas growth. According to QuestMobile's data, Temu's user engagement surpasses that of its main competitors in the same field, underscoring the robust stickiness of social e-commerce.
Reshaping the global e-commerce landscape
In December 2023, propelled by Temu's meteoric rise, Pinduoduo, its parent company, surpassed Alibaba in market value, clinching the top spot among Chinese internet companies.
Amidst economic challenges like inflation in Europe and the United States, global consumption downgrades, and weakened purchasing power, the fusion of "Made in China"’s inherent cost-effectiveness with digitization and efficient supply chains emerges as a formidable advantage, reshaping the e-commerce landscape.
While other e-commerce enterprises aspire to "become the next Temu," EqualOcean asserts that Temu's success is unique, aspiring not just to emulate but to reshape the global e-commerce scene, signifying a strategic evolution.
Temu's global expansion strategy sets it apart in the realm of Chinese enterprises venturing abroad. As a cross-border e-commerce platform, Temu boldly benchmarks itself against comprehensive giants like Amazon, creating a low-price vortex that could ignite a "low-price competition" and reshape the market. Even Amazon is making adjustments, extending FBA delivery efficiency and permitting third-party factories to use its warehouse distribution services, potentially setting the stage for a new round of competition. Temu's collaborations with shipping giants like Maersk, Evergreen, and COSCO aim to reduce costs by 30%-60% and accelerate global expansion.
The outcome of this competition is uncertain, but EqualOcean suggests that Chinese cross-border e-commerce enterprises should shift from relying solely on brand effects to developing innovative business models. Simultaneously, they should explore emerging markets aligned with the "Belt and Road" initiative, fostering localized, cost-effective manufacturing.
Future competition hinges on fostering trends like content e-commerce, live-streaming, gaming partnerships, and social commerce. The "next generation" should establish overseas warehouses, ensuring a reliable supply and enhancing logistics, allowing Chinese models to influence the global value chain.
Temu's dedication to inclusive values, coupled with its low-price strategy, positively impacts the industry chain. This symbiotic relationship creates regional impacts, potentially setting a new trajectory for the e-commerce industry.
In the subdued global consumer market, the question arises whether super-platforms will adapt to real-world pressures, explore new growth avenues, and embrace the sinking market. This may involve a focus on budget-conscious consumers and understanding the needs of the sinking market.
Temu's future trajectory depends on various factors, including market responses, the competitive landscape, and international trade policies. The platform may persist in its quest for new market opportunities, instigating a metamorphosis in the global e-commerce market.
The crucial question of whether Chinese manufacturing can establish a robust brand overseas beyond low prices underscores the need for technological innovation, quality enhancement, and brand development.
In conclusion, regardless of the answers, the uncertainties present new opportunities, signifying a potentially transformative phase in the global e-commerce market. Companies demonstrating adaptability and innovation may emerge as trailblazers, propelling the entire industry forward.
Conclusion
From skepticism to comprehension, to accomplishment and transcendence, Temu's ascent stands as a testament to the continual emphasis on scale effects, the significance of edge markets, and the exploration of overseas market shares by Chinese e-commerce. This surge is driven by capital blitzes, algorithmic product flows, and strategies like "slash the price," underscoring the industry's adaptability to evolving trends and competition.
However, steering through trade challenges amid geopolitical shifts will encounter more hurdles and barriers. Nevertheless, despite the challenges, observing trends and accruing advantages in the current economic landscape ushers in an era of opportunity. Utilizing China as a focal point to propel global trade development has entered a propitious period. With more cross-border e-commerce players entering to partake in the spoils, we anticipate a qualitative transformation in the future.